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Professional Tax


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Professional tax registration for employers having less than 20 employees.

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Professional Tax Registration and Compliance

Professional tax is a direct tax imposed on individuals who earn income through their professions, employment, businesses, or trades. Unlike income tax, which is administered by the Central Government, professional tax is a state or union territory government tax in India. For salaried and wage-earning individuals, the responsibility for professional tax collection and deposit lies with the employer. The employer deducts the professional tax amount from the employee's salary or wages and then remits it to the respective state government. In cases involving individuals who do not receive a regular salary, such as self-employed professionals or business owners, they are required to pay the professional tax themselves directly to the state government. The exact calculation and amount of professional tax may vary from one Indian state or union territory to another, as it is subject to state-specific regulations. However, it is important to note that there is a maximum annual limit for professional tax, which is set at Rs. 2500. This means that no individual should pay more than Rs. 2500 per year as professional tax, regardless of their income level.

Professional Tax Applicability

This tax is levied on all kinds of professions, trades, and employment. Profession tax is applicable to the following classes of persons:

The professionals earning an income from salary or other practices such as a lawyer, teachers, doctors, chartered accountants, etc. are required to pay professional tax.

Professional Tax Applicable States across India

Please refer to the following table to know more about the states which impose professional tax in India:

Applicable StatesNon-Applicable States
Andhra PradeshCentral
AssamAndaman and Nicobar Islands
BiharArunachal Pradesh
KarnatakaDadra and Nagar Haveli
KeralaDaman and Diu
Madhya PradeshDelhi
MeghalayaHimachal Pradesh
MizoramJammu and Kashmir
PunjabUttar Pradesh
Tamil Nadu 
West Bengal

The maximum annual amount payable for professional tax in India is INR 2,500. Professional tax is typically assessed using a predetermined tax slab system based on an individual's gross income, and it is deducted from their income on a monthly basis. Each state or union territory in India has its own Commercial Taxes Department, which serves as the primary agency responsible for collecting professional tax. These departments establish specific tax slabs, which can vary from one state or union territory to another. The tax calculation is based on an individual's annual taxable income. Individuals have the flexibility to pay professional tax either on an annual or monthly basis, depending on the rules and regulations established by the respective state or union territory. This provides some flexibility for taxpayers in managing their tax obligations according to their preference and financial circumstances.

Who Pays Profession Tax?

For salaried and wage-earning individuals, the responsibility for professional tax payment lies with the employer. Employers are required to deduct the professional tax amount from the employees' salaries or wages and then remit this amount to the state government. However, self-employed individuals who engage in their own professions or trades and are subject to professional tax must directly pay the tax to the state government. In this case, they are responsible for managing their own professional tax payments to comply with the regulations.

Employer’s Responsibility for Professional Tax

Business owners are obligated to deduct professional tax from their employees' salaries and remit it to the relevant government department. They must submit a timely return in the prescribed format, which should include evidence of tax payment. Failure to include the payment proof renders the return incomplete and invalid. Compliance with these requirements is crucial for business owners to ensure that they fulfill their professional tax obligations and maintain proper records with the tax authorities.:

There are exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules. The following individuals are exempted to pay Professional Tax:

Professional Tax Registration and Compliance

Professional Tax Registration is mandatory within 30 days of employing staff in a business or, in the case of professionals, 30 days from the start of the practice.

Due Dates for Professional Tax Payment

Employers with over 20 employees must pay professional tax within 15 days of the month's end. For those with fewer than 20 employees, payments are made quarterly by the 15th of the following month after the quarter's end.

Professional Tax Return

The Professional Tax Return is to be filed by all the persons having Professional Tax Registration and the due dates for filing of such returns vary from State to State.

Benefits of Professional Tax Registration

The benefits of Professional tax Registration are given below:

Documents required for Professional Tax Registration

Procedure for Professional Tax Registration

The process for Professional Tax Registration varies across states in India, and the frequency of filing returns is determined by each state's specific regulations. Professionals and employers interested in obtaining professional tax registration should adhere to the following procedure as outlined below.

Penalties Related To Professional Tax Registration

When the professional tax policy is applicable, various jurisdictions may impose penalties for failing to register for Professional Tax. The specific penalty amount is contingent on the regulatory laws of the respective state. Penalties also apply for late submission of Professional Tax returns and delayed payments. Each state's professional tax regulations stipulate the precise penalty amounts. Companies that do not register for professional tax, make delayed payments, or miss filing deadlines may incur fines, late fees, or even legal consequences. For instance, the Maharashtra Government outlines penalty amounts for late filing or non-payment of Professional Tax within the state.

Nature of defaultPenalty Leviable
Not obtaining PT registrationRs.5/- per day
Late filing of PT returnRs.1,000/-
Late payment of PT duesInterest @1.25% p.m.
Penalty @10%

As an example, if the payment of professional tax amounting to ₹1 Lakh is delayed by 12 months, the applicable penalties and interest may be calculated as follows:
Simple Interest Payable: ₹1,000,000 x 1.25% (0.0125) for 12 months = ₹12,500
Penalty for Delay: ₹10,000

Total Amount Due: ₹12,500 (Interest) + ₹10,000 (Penalty) = ₹22,500

The maximum penalty for a delay in payment of ₹1 Lakh for a year, along with a delay in filing the return, would be ₹12,250.

Frequently Asked Questions

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